How to be a contractor

[Kasper]

I'm considering becoming a contractor and have a few questions.

What hourly rate should I offer?  or where do I look to find info on contractor rates?  I've looked at randstad salary guide and glassdoor but those seem to target employees not contractors.  Is there a general multiplier to convert from employee rate to contractor rate?  ex: contactor rate = employee rate x 2?

What do I need for legal, liability, etc? 

I'm guessing insurance is good to have, but what kind do I get and where do I get it?

I plan to search online for a contractor agreement, does anyone know a good source for one?

I'm also considering selling some little things I'm making on my spare time.  Perhaps that should be a separate thread but maybe worth mentioning here since we're talking about insurance.

Location: BC, Canada
Education: diploma in Electronics Engineering Technology and B.A.Sc. degree in Electronics Engineering (straight A's and won some contests).
Work experience: 14 years
Tools: Circuit studio (aka altium lite), KiCAD, freeCAD, a good soldering iron and a low cost; oscilloscope, power supply and toaster oven.

Skill level:
Hardware: junior for complex systems, senior for simple things
Soldering: senior
FW: junior / rusty intermediate
Mechanical: junior

Most of my experience is from making simple wireless sensors on my spare time and as the only HW designer in small companies.  I think I'm quite proficient at that and I think my years of experience classify me as a senior but I'm not sure about that title.  I haven't worked on many complex systems or had much opportunities to learn from seniors outside of this forum, google, datasheets and app notes so I think intermediate is probably a more accurate title.

[tom66]

IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position.  Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

If you are sure you want to do this, I'd make sure you have a minimum of 12 months expenses banked, ideally 18 months, because generally once you go contracting, you want to stay that way and therefore need to survive a long period without work comfortably.  It's harder to get hired as an employee again if you've been contracting, *especially* if you're looking for a job in a downturn, because a savvy employer thinks you'll just leave as soon as things pick up again.

Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

In the UK, which is not Canada of course, the general rate for contractors seems to be about 2x what a senior perm employee would earn before tax.  Niche fields might be up to 3x (£60-75 per hour I've seen!)

Get an accountant, unless Canadian taxes are ridiculously simple.  You'll want to see if, and how, you can transfer your existing equipment towards your business, as that may be tax deductible.  And you might be able to claim expenses for working from home, if you do that.

I've noticed there are a lot more contractor roles out there for specialised areas.  So Linux kernel engineers, FPGA engineers, certain embedded software platforms/stacks (Bluetooth on such-and-such a chip) are commonly advertised.  It's rarer to just find someone looking for just a "general electronics engineer" ie I need schematics, PCB...  That doesn't mean these roles don't exist, but they may be more oversubscribed and would likely be done more by perm employees.  You'll probably do better in a niche field, one where it's not worth hiring someone to work full time.  Especially because you can command a higher rate.  From what you've described of your skill set, my honest impression is that contracting might be hard work for you, but I'm speaking from a UK position, as a perm employee, so YMMV.

[nctnico]

IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position.  Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

Actually a recession is the best time to be contracting development work. Companies finally have time to invest in new products and changing economics force the design of new products in order to stay relevant. I've been contracting full time for about 12 years already. Economic downturn means my business is booming. It is the economic highs that give me trouble because everyone is busy selling products and new development is pushed ahead into the future.

Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

That is bad advise. Professional indemnity insurance doesn't exist unless it is legally required. If you contract for companies then rule out any liability in terms and conditions. When selling consumer products, setup several limited liability holding companies. One that keeps the money + intellectual property and one that takes care of the sales. This is something to talk about with a lawyer; the aim is to make sure you can keep your home in case something goes really wrong with a product. Where it comes to consumer product liability it is extremely important to make sure a product complies with all regulations and is certified by third parties. That at least shows that you have taken steps to make sure the product is designed to be safe.

It is good to have an accident liability insurance though in case you knock over an expensive piece of equipment at a customer; these insurances are not expensive.

To the OP: this subject has come up many times already and very usefull advice on all topics you have questions about has been given already. Try the forum's search function

[Kasper]

IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position. 

More of a sinking ship than a redundancy.  I'm job hunting and trying to decide between contractor positions and perm.

Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

I'm betting on recession in Canada at the least.  Makes sense, as my employer's funds got lower, we put contracts on hold and shovelled more work on my plate.

If you are sure you want to do this, I'd make sure you have a minimum of 12 months expenses banked, ideally 18 months, because generally once you go contracting, you want to stay that way and therefore need to survive a long period without work comfortably.  It's harder to get hired as an employee again if you've been contracting, *especially* if you're looking for a job in a downturn, because a savvy employer thinks you'll just leave as soon as things pick up again.

I've got some cushion, if the job market sucks, I should be ok by focussing on renovating my home, selling it and repeat.

Good point, never thought of that (not wanting to hire ex-contractors). 

Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

In the UK, which is not Canada of course, the general rate for contractors seems to be about 2x what a senior perm employee would earn before tax.  Niche fields might be up to 3x (£60-75 per hour I've seen!)

Get an accountant, unless Canadian taxes are ridiculously simple.  You'll want to see if, and how, you can transfer your existing equipment towards your business, as that may be tax deductible.  And you might be able to claim expenses for working from home, if you do that.

I've noticed there are a lot more contractor roles out there for specialised areas.  So Linux kernel engineers, FPGA engineers, certain embedded software platforms/stacks (Bluetooth on such-and-such a chip) are commonly advertised.  It's rarer to just find someone looking for just a "general electronics engineer" ie I need schematics, PCB...  That doesn't mean these roles don't exist, but they may be more oversubscribed and would likely be done more by perm employees.  You'll probably do better in a niche field, one where it's not worth hiring someone to work full time.  Especially because you can command a higher rate.  From what you've described of your skill set, my honest impression is that contracting might be hard work for you, but I'm speaking from a UK position, as a perm employee, so YMMV.

I have an accountant and already claimed my equipment.

What you say about specialization makes sense. It's kind of ironic because I've purposely tried to be broad and general as I've worried specializing would limit my options.

[Kasper]

IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position.  Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

Actually a recession is the best time to be contracting development work. Companies finally have time to invest in new products and changing economics force the design of new products in order to stay relevant. I've been contracting full time for about 12 years already. Economic downturn means my business is booming. It is the economic highs that give me trouble because everyone is busy selling products and new development is pushed ahead into the future.

Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

That is bad advise. Professional indemnity insurance doesn't exist unless it is legally required. If you contract for companies then rule out any liability in terms and conditions. When selling consumer products, setup several limited liability holding companies. One that keeps the money + intellectual property and one that takes care of the sales. This is something to talk about with a lawyer; the aim is to make sure you can keep your home in case something goes really wrong with a product. Where it comes to consumer product liability it is extremely important to make sure a product complies with all regulations and is certified by third parties. That at least shows that you have taken steps to make sure the product is designed to be safe.

It is good to have an accident liability insurance though in case you knock over an expensive piece of equipment at a customer; these insurances are not expensive.

To the OP: this subject has come up many times already and very usefull advice on all topics you have questions about has been given already. Try the forum's search function

Perhaps your differing opinions come from differing size of companies? In downturns, small companies are trying to avoid bankruptcy while big companies are trying to avoid severance payments?

I have followed some posts on this subject, and found them very interesting.  While info for people with different skillsets in different locations at different times may still be relevant, I hope the description I provided of myself will garner some more accurate info.  We are in unprecedented times, things are changing quickly.  For example the first 2 responses referenced the current economic conditions.  The economy was different half a year ago. 

[jonpaul]

I was consulatant in analog design, HV, power , audio from 1977..2000

What is Your skill and experience in

Marketing?

Business?

Legal, Govt paperwork and compliance?

Negotiation?


All required skills and all these are needed as you are all of them, if you want it or not.

That experience CANNOT be had by  internet video   nor a degree.

Only by   hard won experience.

Expect to loose money first 2..6 years.

Have a few years savings f you fail.
Jon

[Kasper]

I was consulatant in analog design, HV, power , audio from 1977..2000

What is Your skill and experience in

Marketing?

Business?

Legal, Govt paperwork and compliance?

Negotiation?


All required skills and all these are needed as you are all of them, if you want it or not.

That experience CANNOT be had by  internet video   nor a degree.

Only by   hard won experience.

Expect to loose money first 2..6 years.

Have a few years savings f you fail.
Jon

I'm probably junior in those categories, unless watching the TV show Dragon's Den counts as experience

[Ed.Kloonk]

Wife/spouse/partner is key for shoring up the shortfalls. Can't overstate it.

Speaking of partners, is there anyone you know who might be interested in 'going halves' in the exercise?

[bidrohini]

This video may be of some help:
Here is also a forum where contractors often hang around: https://forums.mikeholt.com/

[jonpaul]

OP: As a contractor or consultant you will have NO time for TV, Video, Family, etc.

You will be on call 24/7 if you want to suceed.

Like a small biz startup.

Kindly suggest that you STOP ANY VIDEOS! STOP ANY GAMES OR SOCIAL MEDIA! READ TEXTBOOKS!

Just the rambling of an old retired EE (since 55 years)

Jon

[AndyC_772]

OP: As a contractor or consultant you will have NO time for TV, Video, Family, etc.

You're doing it wrong.

[nctnico]

IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position.  Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

Actually a recession is the best time to be contracting development work. Companies finally have time to invest in new products and changing economics force the design of new products in order to stay relevant. I've been contracting full time for about 12 years already. Economic downturn means my business is booming. It is the economic highs that give me trouble because everyone is busy selling products and new development is pushed ahead into the future.

Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

That is bad advise. Professional indemnity insurance doesn't exist unless it is legally required. If you contract for companies then rule out any liability in terms and conditions. When selling consumer products, setup several limited liability holding companies. One that keeps the money + intellectual property and one that takes care of the sales. This is something to talk about with a lawyer; the aim is to make sure you can keep your home in case something goes really wrong with a product. Where it comes to consumer product liability it is extremely important to make sure a product complies with all regulations and is certified by third parties. That at least shows that you have taken steps to make sure the product is designed to be safe.

It is good to have an accident liability insurance though in case you knock over an expensive piece of equipment at a customer; these insurances are not expensive.

To the OP: this subject has come up many times already and very usefull advice on all topics you have questions about has been given already. Try the forum's search function

Perhaps your differing opinions come from differing size of companies? In downturns, small companies are trying to avoid bankruptcy while big companies are trying to avoid severance payments?

That is the wrong seperation. You have to seperate companies in two types: the ones that are weak and the ones that are strong. Size doesn't matter. Recession will kill the weak companies that where coasting along anyway; these are not potentional customers because they won't invest in new technology due to lack of funds or vision.

Which touches on the most important subject where it comes to contracting: customers. The very best way to start contracting is by doing this next to your regular job. Just try to reel in a project and do it. See how it goes. My strong advice is to take on the project for a fixed price even if the customer doesn't seem to care how much it will cost (they do care!).

[AndyC_772]

It's rarer to just find someone looking for just a "general electronics engineer" ie I need schematics, PCB...  That doesn't mean these roles don't exist, but they may be more oversubscribed and would likely be done more by perm employees.  You'll probably do better in a niche field, one where it's not worth hiring someone to work full time.  Especially because you can command a higher rate.

I agree. None of my regular customers came to me wanting a 'general' electronic engineer; they all wanted an engineer with specific, proven experience in their own particular product area - or at least, something close enough that it's obvious that the skills and requirements are transferrable.

Tip: don't advertise yourself in terms of your electronics skills. Instead, advertise the kinds of industries and products you've worked on, and/or the type you want to work on in future. Most of my customers don't have an electronics design dept of their own, and don't especially care what types of components or circuits I use to solve their problems.

What I deliver is a solution to a problem, usually consisting of CAD data, a BoM, firmware, documentation, and support. Nobody really cares about the implementation details until much later - often when it's already in production and they just want to better understand how everything works (and knowing already that it does, in fact, work).

From what you've described of your skill set, my honest impression is that contracting might be hard work for you, but I'm speaking from a UK position, as a perm employee, so YMMV.

What leaps out at me, is that you're academically qualified and have 14 years' experience, yet you describe your own skill level as 'junior' in terms of anything complex, and the tools you're still using are hobby grade at best.

Why is that? What have you been doing for those 14 years? Designing, or just soldering?

Being a consulting engineer (and maybe that's not what you mean by 'contractor'...?) means you need to be able to confidently walk in to a new customer's office, listen to their needs, and using your own skill and experience, decipher what they really mean, and convince them that you can offer a solution. Or walk away if you know you can't.

Don't underestimate how hard this is. The people you meet won't be electronic engineers, they won't speak in the same jargon and won't necessarily frame their requirements in terms of an electrical spec. Remember that they're hiring you to be the electronics expert.

The first part of any job is to come up with an engineering specification, ie. a list of deliverables that actually will solve your customer's problem - including the parts of the problem that they don't know about yet, but still expect you to take care of. Remember again: there's a good chance they're looking for you to make their electronics problem go away, and that's the whole problem, not just the bits they're explicitly spelling out on day one.

Their needs could be tightly specified, which is great when it happens. They could be trivial, to the point where you feel bad even charging for your time. They could be vague. They could be impossible. They could be vastly more difficult and costly than they're expecting. Worst of all is when they're implicit, and neither of you even mentions them until it's too late and you get the "doesn't it even do...?" phone call.

My advice? Try and get a full time job in a design capacity, where you can develop your skills and, if at all possible, meet some customers.

Be aware, some companies like to build a wall between customers and engineers, as though allowing the two to meet is somehow dangerous.

It's not. Customers are just people, trying to make a living, and they have problems you can help them with. 99% of the time they'll be delighted to see you; the other 1% is when something has gone wrong and they're not getting the support they expect.

Just don't be both of the reasons for that 1%.

[Kasper]

Wife/spouse/partner is key for shoring up the shortfalls. Can't overstate it.

Speaking of partners, is there anyone you know who might be interested in 'going halves' in the exercise?

My wife is great.  There are some people I'd like to work with but I think I'd prefer to be solo.  How does one get into that? You find a big contract and invite friends to help?

[Kasper]

This video may be of some help:
Here is also a forum where contractors often hang around: https://forums.mikeholt.com/

Thank you, this will be something to listen to when I go hiking today.

[Kasper]

OP: As a contractor or consultant you will have NO time for TV, Video, Family, etc.

You will be on call 24/7 if you want to suceed.

Like a small biz startup.

Kindly suggest that you STOP ANY VIDEOS! STOP ANY GAMES OR SOCIAL MEDIA! READ TEXTBOOKS!

Just the rambling of an old retired EE (since 55 years)

Jon

Between school, home renos and work, I had little 'unproductive' time for about 10 years.  I'm looking for a little more balance now.

[Kasper]

What leaps out at me, is that you're academically qualified and have 14 years' experience, yet you describe your own skill level as 'junior' in terms of anything complex, and the tools you're still using are hobby grade at best.

Why is that? What have you been doing for those 14 years? Designing, or just soldering?

Being a consulting engineer (and maybe that's not what you mean by 'contractor'...?) means you need to be able to confidently walk in to a new customer's office, listen to their needs, and using your own skill and experience, decipher what they really mean, and convince them that you can offer a solution. Or walk away if you know you can't.

I think this is one of my specialties: figuring out my 'customers' ' problems and offering them well defined solutions.  Most of my 'customers' have been my employer/CEO/manager who does not have electronics experience.  They usually have big dreams and small budgets and I provide good enough solutions to receive great performance reviews.

My first 4 years was in a medium sized company with lots of skilled people.  Did 2 years in production: soldering mods, testing, troubleshooting then 2 years in test documentation and automation. 

Since then I've been mostly doing design work, with a bit of soldering in start ups where there's a FW guy, a SW guy and I do HW, mech, purchasing and prototype production and testing.

It's usually just a few sensors, a battery and an MCU.  It does have to be small and have good battery life but it's relatively basic.  I have made somewhat complex test automation, made diy emc probes and used them with my oscilloscope to find and mute noise, I've written algorithms for calibration and compensation and I've made a test board with a 0.4mm pitch bga for $100.  When things don't work or harder stuff comes up I figure it out quickly and make good quality products.  I just haven't worked on any really complex systems and I come here and see there is a lot of stuff I've never touched.

[AndyC_772]

OK, good answer. I wish you the best of luck!